10 Tips To Real Estate Investing For The Young –and young-at-heart
It’s never too late to begin investing in real estate…..it’s never too early either. Real estate offers a solid investment opportunity which can provide not only an income stream but long term value appreciation as well. The future health of the real estate market depends upon the knowledge we pass onto the next generation and help them understand the value of home ownership and investment. Regardless of the ups and downs of the market, people will always need housing, so real estate will remain a good way to create wealth.
By understanding some of the basics of real estate investing, you can begin to create your own plan. Here are 10 tips for the young, and the young-at-heart.
there really is no “right” time to start investing. Each market offers opportunities for buyers. Property values might fluctuate from one year to another, but a long term investment will always prove to be a good choice. With rising home prices, each month you delay is equity lost in your new property.
Property purchases require cash. You need money for down payments and closing costs, plus possible repairs once you own the property. Learn about options other than your own savings for these costs. Low down payment loans, such an FHA, are available for first time home buyers*. Many cities and communities offer down payment assistance and refurbishing loans as well.
Consider these resources as well as possibly including others as partners in your investments.
Understand Your Expected Cash Flow
Understand your cash flow needs. In simple terms, cash flow is what is left over after all expenses are paid. For a rental property, expenses could include, mortgage, interest, maintenance, insurance, utilities, rental agents and more. You must also determine the average vacancy rates for the area and factor this into your annual budget.
Budget For The Unexpected
Have a fund available to draw on for the unexpected. Even the most carefully planned project can have unexpected costs. Have a back-up plan to meet these costs. Create a fund to handle major repairs, excessive vacancy and even legal fees if needed.
Invest For The Long Term
Real estate investing should not be viewed as a “get rich quick” scheme. While you might find an opportunity to have a quick flip, most real estate equity is realized over years, not months. Prepare for the long term and build your portfolio for growth and income potential.
Realize Real Estate Investing Takes Effort
Investing in real estate takes work. You need to do your research and due diligence before investing. Know the market and understand the trends which can affect your purchase and ownership. Once you are a property owner, expect to stay involved. Even a large portfolio with an asset manager requires owner involvement and awareness.
Understand The Risks
Although real estate can be more stable than the stock market, it still involves risk. Before investing, you should be certain that you can hold the property until conditions are right to sell. Consult with your financial advisor to determine how a real estate investment fits with your financial picture as a whole.
Don’t Over Extend
Remember that when you first start out, you need to be very careful about the properties you purchase. After evaluating the risk, be honest about your ability to handle the negative possibilities the opportunity could present.
Find A Mentor
Don’t tries this at home kids! There is no reason to reinvent the wheel. Find an experienced real estate investor and seek advice and information. The right mentor can save you thousands of dollars and keep you from making the wrong investment.
Wait for the right opportunity. Not every deal will fit with your goals. Learn to analyze each possible deal for the cash flow, possible appreciation, leverage and risk. Be prepared to walk away. Even if the deal seems perfect, make sure you’re ready for what it involves. Never take on more than you’re ready for; take things slowly at first.
Real estate can offer solid investment opportunities. Even a first time investor can realize profit and positive cash flow with careful planning and research. Start building your real estate portfolio now. Regardless of whether you are young or just young-at-heart, a real estate purchase could provide a low-risk addition to your other investments for both income and asset value growth.